This thread has made me quite interested in INBK. And to be sure the numbers are good over the past year. My lone question would be, why did the revenue decrease from late 2012 / early 2013?
Revenue (m)
2012 Q1 8.1
Q2 8.2
Q3 9.5
Q4 10.0
2013 Q1 8.8
Q2 9.9
Q3 8.1
Q4 8.3
2014 Q1 8.5
Q2 9.2
Q3 9.9
I see a big bump in “Revenue From Loans Sold” and “Mortgage Banking Activities” during that timeframe, perhaps that explains it somehow? Happy to dredge up and post those figures too if it’d help.
Refinancing dried up suddenly as mortgage rates rose a bit, and they had a lot of their business in refinancing. that’s my understanding of it anyway.
Saul
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Hi utachris,
Saul gave you the answer. I will expand on it.
Up-board, I posted the non-interest income, where you see a sharp drop in the income from this category. See below:
Non-interest income (‘000):
09/14: 1,943
06/14: 1,622
03/14: 1,511 (dropped because of decline in mortgage banking activities)
12/13: 3,719
BTW, in the posts above the last line was incorrectly tagged as 06/13. It should be 12/13 as noted above.
We don’t want the bank to be an exclusive refinance shop. The bank should be able to earn monies by making loans using its deposits. It should be paying less interest on the deposits and earning more interest on the loans (the stuff called “net interest income”). Right now, INBK’s net interest income is less than its non-interest expenses (“operating expenses”). The thesis here is that the bank has been heavily investing in people and IT, which has increased the operating expenses. These investments though are bearing fruit as shown by the increases in the net interest income.
A high-level view is this. The bank invests in people and IT. This is upfront cost. Then, these people are able to sign in a steady stream of loans and make effective use of the deposit base. So, effectively, one would have expenses growing at a much much slower rate than the income these investments bring. We already see that happening with INBK. The net interest income is growing much faster than the non-interest expenses (which appear to have flatlined in the past 4 quarters or so). I 'm thinking Q4 2014 and Q1 2015 will really show us where this bank is headed but I 'm so far pleased with the progress.
The downside is protected to some extent by the fact that INBK is still trading below book value. But then, this is a micro-cap stock, so one needs to be prepared for wild swings and volatility.
This is my largest position, so I may be getting biased by my research!
Anirban
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Thanks Saul and Anirban, useful information. I will likely open a position tomorrow.
Refinancing dried up suddenly as mortgage rates rose a bit, and they had a lot of their business in refinancing.
Hi Utah Chris,
Remember that that’s an explanation of what happened, but it’s not all good news. Management didn’t show such good judgement at the time, being so concentrated in refinancing! However, they were small, and starting out, and they are learning and diversifying. Also their price is a lot lower as a result of that misstep, but the business is clearly growing nicely again. I did take a small position recently myself.
Saul
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